Will This Downgrade Hurt PDC Energy (PDCE) Stock Today?

Story updated at 9:50 a.m. to reflect market activity.

NEW YORK (TheStreet) -- PDC Energy (PDCE) was downgraded to "market perform" from "outperform" by BMO Capital Monday.

PDC Energy fell 1.1% to $60.39 in morning trading.

The firm lowered its price target for the company to $63 from $70. BMO Capital analysts said the downgrade is a valuation call after PDC Energy didn't raise its production guidance for 2014.

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Separately, TheStreet Ratings team rates PDC ENERGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate PDC ENERGY INC (PDCE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 45.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 155.38% and other important driving factors, this stock has surged by 54.98% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • PDC ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PDC ENERGY INC reported poor results of -$0.92 versus -$0.58 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus -$0.92).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PDC ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $39.62 million or 16.66% when compared to the same quarter last year. Despite a decrease in cash flow of 16.66%, PDC ENERGY INC is in line with the industry average cash flow growth rate of -22.97%.
  • You can view the full analysis from the report here: PDCE Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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